Report on Innovation in China's Financial System (2005)

Author: Yang Ruyan
Publisher:
Publish Date: 2005-07-01
Features: China Financial System Innovation Report is published annually. The book is primarily based on institutional economics and law economics. It summarizes the regulatory laws, regulations, and rules issued by macro-control departments, comprehensive economic departments, the central bank, and the three major regulatory bodies for financial sub-markets such as government bonds, corporate bonds, convertible bonds, funds, futures, insurance, enterprise annuities, trust, and banking services in each year, and evaluates their actual effects. Following the internal logic of institutional analysis, it discusses the innovation clues and frameworks of major financial systems such as monetary policy/exchange system, market access/exit system, risk control system, and asset management system, and analyzes the basic mechanisms and driving forces of institutional arrangement innovation.
Key Points:
● Risks formed under the traditional financial service framework are often mitigated through liquidity, which necessitates other buffer systems to match contractionary monetary policies to overcome market risks induced by liquidity shortages.
● The financial regulation model has not deviated from the traditional domestic administrative regulation model. The division of industry regulation has degenerated into division-by-subject regulation, leading to the segmentation of financial resources by departments and industries. Some institutional arrangements aimed at avoiding the consequences of resource segmentation began to emerge in part in 2004.
● The division-by-subject regulation model also makes it difficult to achieve cross-entry in financial services. The same type of financial services requires different regulatory measures, which, on one hand, leads to policy arbitrage, and on the other hand, exacerbates resource segmentation.
● Poor coordination in asset management systems, the lack of means in risk control systems, and the environmental challenges faced by continuous operation supervision are currently some of the most prominent issues in financial regulation.